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Consumer Credit Counseling Services - What you need to know

Credit counseling, whether non-profit or for-profit, should focus on one key area. This is working with a consumer to understand their unique credit circumstances, and educate that person about budgeting, debt repayment and money management. Credit is one of the single, most important areas of life that can hugely impact a consumer's financial future; therefore, understanding credit is key.

Credit counseling services are not only for people who find themselves in the midst of a financial crisis, but they are also very valuable for young people or others new to managing credit. Developing good money management and credit management skills early can be the most important variable to avoid a credit crisis in the future. Counseling services can also help individuals facing other financial crises, including collections agencies and foreclosures. Again, credit counselors will help an individual set out realistic budgets that are in tune with their present income and debt responsibilities.

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Typically, an individual will make monthly payments to the counseling service, which then makes payments to the creditors involved. Having said that, repayment plans can vary in terms of the timetable, with repayment plans lasting a few months up to many years.

3) When setting out a debt repayment plan, find out exactly how the money you pay the organization will be forwarded to your creditors. Are they paid out immediately? Does the organization hold onto your payments for 30 or 60 days before distributing them? If this is the case, ask yourself why? What are they doing with your money in the meantime?

4) Any promise made that sounds too good to be true more than likely is. Never believe any company or organization that claims to be able to remove accurate information from your credit report. They can't - no one can.

5) Ensure that all of your money is going to a debt repayment plan. Unless you're working with a legitimate company wherein you're paying for their services, every cent in your repayment plan should be going to your creditors. There should be no requirement for you to provide a 'fee' or 'donation'.

6) Learn exactly which creditors your debt repayment plan will cover. Some organizations will not work with creditors unless those creditors offer them some type of financial benefit or support. Be certain that your debt repayment plan includes every one of your creditors, and if it doesn't, find out exactly why it doesn't - before you pay!

Accessing not for profit credit counseling or for profit credit counseling can be the best financial decision you make for your future. However, it can also lead to even more problems if the wrong people are in control of your credit repair and debt repayment responsibilities. If there is ever a time to be a smart consumer, addressing your credit and debt repayment responsibilities is the time.

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